According to cryptocurrency research firm Santiment, there are at least five keywords that could signal a bottom in the cryptocurrency market.
Bitcoin (BTC) price has fallen 3% over the past 24 hours as geopolitical tensions in the Middle East rise. Cryptocurrency traders are increasingly concerned about what impact a deepening conflict will have on risky assets.
In an Oct. 2 blog post, Brian Quinlavin, director of marketing at Santiment, said the frequent use of five key “fear” words on social media can help traders identify if the market is overly fearful and potentially ready for a breakout. I said there is.
words that announce the bottom
“When markets are down, people often start using certain words more often. These scary keywords, often referred to as “FUD” (fear, uncertainty, doubt) words, can actually signal that things are about to change positively,” Quinlavin said.
The first word is “crash.” When everyone talks about a crash, it usually means prices plummeted and traders panicked. Ironically, when the word “crash” is most often mentioned on social media, it is usually when prices begin to recover.
The word “crash” is used on social media as it maps to the price of Bitcoin. Source: Santiment
The same goes when the words ‘sell’ and ‘die’ appear on social platforms. Like the “crash” when traders start using the words “sell” and “death” the most, it usually means a recovery is just around the corner, creating “opportunities for the brave,” Quinlavin says.
The fourth fear keyword is “crackdown,” which refers to regulatory and legal pressures that make traders feel restricted and fearful of the potential consequences of government action or new or ongoing litigation.
“These fears can drive prices down, but they often present good buying opportunities, especially when the panic seems excessive,” Quinlavin says.
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The fifth fear word is ‘liquidation’, which can be a double-edged sword depending on the market direction. Liquidation means that a trader is forced out of a position due to sudden price movements that can occur during bullish and bearish situations.
The use of the word “liquidation” on social media contrasts with the price of Bitcoin. Source: Santiment
Typically, investors on social media tend to use the word “liquidation” when celebrating the fact that people who are shorting the market (betting that prices will fall) are stopped and taking losses. Quinlavin said enhanced short-term liquidation was “historically a good opportunity for new buyers to enter.”
Quinlavin concluded that taking a “contrarian approach” to social media sentiment is “usually” the right decision.
“Extreme moments like the FTX collapse or the recent interest rate cut where everyone seems to be either bullish or bearish are usually where a clear picture is drawn,” he said.
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